Facing $50K in Debt in 2024? Here Are 7 Things You Must Do
Written by
Andrew Lisa
Edited by
Carly Brashears
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Eliminating debt is a classic New Year’s money resolution — and you can bet it will be especially popular this year with interest rates higher than they’ve been for most of the 21st century.
According to a new GOBankingRates study of more than 1,000 adults, nearly 43% of people are already in debt and another 9% aren’t, but expect to be in 2024. Getting out of debt ranks higher on people’s list of goals for the new year than anything but saving more money, and debt is the No. 2 financial stressor behind only inflation.
But in 2024, getting in the clear will be a much tougher hill to climb for some than others.
Those who owe $50,000 or more face an especially long and difficult journey with fewer options for success and a greater likelihood of financial catastrophe.
If you owe five figures five times over, don’t panic — but do take the following steps before it’s too late.
Acknowledge There’s a Problem and Brace for a Tough Road Ahead
You probably didn’t dig a hole this deep overnight, and if you amassed enormous debt gradually, you might not realize that you’re in over your head, but you are — and that’s a fact you must accept before it becomes impossible to dig out. With that size anvil hanging over your head, only one thing is certain — ignoring it will quickly make a bad situation much, much worse.
“No matter what your income, $50,000 in debt is a significant amount,” said Sean Fox, president of debt resolution at Achieve, a digital personal finance company in San Mateo, California. “The first step is to acknowledge it is a problem and that you need to take action. It’s not going to go away on its own. It’s also important to accept that it will likely take time and require some belt-tightening and other changes in your financial behaviors.”
Work Toward a Realistic Plan With Achievable Goals
Any sane person who owes $50,000 probably wishes they didn’t, but wishing doesn’t work. Planning does.
“Saying you want to get out of debt, similar to saying you want to lose weight, is great,” said Fox. “But the best intention isn’t an action plan. You need to do your research and figure out a realistic plan that you can commit to. Each person will be different. The ‘realistic’ part is important. Many people anxious to work their way out of debt start out by cutting expenses so drastically and/or jumping into a program so quickly that there’s no way they will be able to stick to it.”
Can You Do It on Your Own? Weigh Your Options
Depending on your income and overall financial health, you may or may not be able to pay down your massive debt the old-fashioned way — little by little over time with a disciplined commitment to one of two primary strategies.
“First, is there any way you can pay off the debt on your own, with the help of a solid budget and either the avalanche or snowball strategy?” said Fox.
The Snowball Method
One of the most popular debt-reduction strategies is designed to score fast wins early by attacking your smallest debts first.
“The snowball method to pay off debt has you starting by listing your debts and ranking them in order from smallest to largest,” said Fox. “Pay the monthly minimum on each debt except for the smallest debt. For that debt, pay as much over the minimum as you can. When you’ve paid off that smallest debt in full, continue with the same pattern to pay off the next-smallest debt. This works well for people who like checking an item off the list — even a small one.”
The Avalanche Method
The second strategy focuses not on how much you owe but on how much the bank is taking you for in finance charges.
“The avalanche method starts with making a list of outstanding debt by the interest rate charged for each,” said Fox. “Rank from the highest to lowest interest rate. Then pay the monthly minimum balance on all debts while applying as much additional money as you can to the debt bearing the highest interest rate. Once you’ve paid off that balance, continue to the debt that has the next-highest interest rate. Keep going until all debts are paid off.”
If $50,000 is simply too much for you to overcome with these or other traditional debt-reduction strategies, Fox suggests the following alternatives.
Consider a Personal Loan
Borrowing money to pay off a loan might seem counterintuitive, especially with interest rates higher than they’ve been in more than 20 years. But the right kind of loan can consolidate many debts into one, reduce your interest payments and leave you with a more manageable and predictable single fixed-rate monthly bill.
“A personal loan may offer a rate lower than your credit cards,” said Fox. “The idea is to consolidate your other debts into one with the lower rate, and pay that one loan off faster.”
But remember, this is not a magic bullet or even a guaranteed option, particularly in today’s economic climate.
“Interest rates can vary widely, and are generally dependent on your credit profile and scores,” said Fox. “People with higher scores qualify for the lowest rates.”
Transfer Some of Your Balances
Balance transfer credit cards can buy you a year or more of precious breathing room without any further interest accruing, provided you make at least the minimum monthly payment.
“These credit cards, with low or zero interest, are usually available only to those with good credit and are harder to come by,” said Fox. “If you do find one and are eligible, know that the promotional interest rate is limited, often expiring in six to 12 months but sometimes up to 21 months.”
If you already owe $50,000, it’s unlikely that a bank will extend you another 50 grand in credit, but it might extend enough for you to shelve some of what you owe until 2025 while you whittle down the rest.
“For $50,000 in debt — even if all on credit cards — a balance transfer might not be realistic,” said Fox. “However, it may work for some credit card debt.”
Negotiate With Your Lender or Hire Someone To Do It For You
First, you should contact your lender, explain the hardship you’re facing, and plead for better terms.
“Borrowers can call their lenders and ask for a lower rate,” said Fox. “If you have a good track record of payment and can explain why you are asking for the lower rate, the lender may agree. With $50,000 of debt, though, a slightly lower rate may not be enough to really get you out of debt.”
In that case, consider hiring a third-party company specializing in negotiating on your behalf.
“Debt management plans, offered by credit counseling firms, can lower the interest rate on a credit card,” said Fox.
Cut Your Losses, Take the Credit Hit and Settle Through Debt Resolution
If the bank won’t give you a personal loan or issue you a balance transfer card, and if you’re too far gone for the avalanche and snowball methods to make a dent, it’s time to get real about what you’re up against and shift your strategy to avoiding bankruptcy.
You can do that by entering a program that gets your lenders to settle for whatever you can realistically pay.
“Debt resolution is the process of working on a consumer’s behalf to lower principal balances,” said Fox. “This can be a smart option for someone with significant debt — like $50,000 — especially if having a hard time making minimum payments and if dealing with the impacts of financial hardship such as job loss, medical expense or divorce. These programs are regulated by the Federal Trade Commission.”
Use this only as a last resort. According to LendingTree, lenders report debt settlements to the credit bureaus and you can expect the result to hurt your credit.
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